Air Transport Bill, 1984: Second Stage.

Minister of State at the Department of Communications (Mr. Nealon)

I move: "That the Bill be now read a Second Time".

I should state at the outset that, while the Bill is rather complex in its terms, its purpose is to close off a potentially serious loophole that has come to light in the Air Navigation and Transport Act, 1965. That Act deals, inter alia, with the Minister's powers in regard to the regulation of air fares and it is in respect of those powers that I am now proposing to clarify the situation.

Section 10 of the 1965 Act provides for the approval by the Minister for Communications of airline fares proposals for air services to, from and within the territory of the State. A requirement to secure approval for international air fares is the accepted norm applied by aviation regulatory authorities worldwide, a requirement that is reflected in the various inter-governmental bilateral and multi-lateral agreements that govern the operation of international scheduled air services. The various bilateral agreements and arrangements covering the exchange of traffic rights between Ireland and other countries generally include a provision relating to the approval of tariffs and it was in recognition of that situation that the 1965 Act embodied in Irish law provisions giving the Minister statutory powers to control air fares.

Airlines accept the fact that scheduled service fares require Government approval and carriers serving Ireland submit their fares proposals for approval as a matter of course. For practical reasons, control of air fares has been applied at the level of fares to be actually sold to the public and proposals are submitted to the Minister on this basis.

Developments which occurred in the Irish market last summer affecting fares between this country and the United States, and which saw some fares being sold at below approved levels, threatened to undermine this control. Steps taken by my Department at that time resolved the then prevailing difficulties. More serious difficulties emerged early this year when a large Dublin travel agent widely advertised Shannon-New York services at fares which did not stand approved by me. Efforts to resolve the difficulties through consultations between my Department, the airline and the travel agent concerned failed and, since the stance taken by the other parties constituted an effective challenge to the generally accepted interpretation of the 1965 Act, I sought and obtained a temporary High Court injunction restraining the airline concerned from selling fares which did not have my approval. The injunction was to have effect until the substantive hearing of the case, but on appeal to the Supreme Court the injunction was lifted, the Court taking the view that, given the terms of the 1965 Act, the airline concerned had an arguable case and that what the court termed "the balance of convenience" rested in not continuing the injunction. I should add that both the High Court and the Supreme Court refused to grant an injunction directly against the travel agent, the view being taken that the scope of the 1965 Act did not extend beyond airlines.

While the court decisions to which I have referred do not reflect a definitive judgment on the legal issues involved — that would have to await the substantive hearing of the case — I have been considering the implications of the present situation. A final determination of the legal action could take up to 12 months and the legal advice available to me suggests that in the meantime my powers to control air fares would be severely undermined. This could lead to considerable instability in the market place, with discounting and other malpractices emerging on a scale that would undermine approved tariff structures and could have serious financial implications for airlines generally and for Aer Lingus in particular. In the long term, such a situation would only serve to put at risk the range of air services which Ireland enjoys, a development which would not be welcomed by either business or tourism.

Given the present situation, I am satisfied the best course of action is to proceed with the legislation now before the House.

The Bill is not introducing any new principle. Its objective is to remedy a defect in the 1965 Act and to close off a loophole which can be used to effectively render meaningless the control of air fares which I must exercise having regard to our bilateral commitments to other countries and in the general national interest. As I have indicated already, Government control of air fares is the accepted norm and that applies even in the case of administrations who are to the fore in advocating liberalisation. I should add that the EEC Commission, which has recently put forward proposals aimed at developing a Community air transport policy, also accepts that fact.

I should stress that the proposed Bill is a neutral measure, which is not biased in favour of either high or low air fares. Accordingly, it is inaccurate to describe the Bill as an anti-consumer measure. The prerogative to submit fares proposals at whatever levels they wish will continue to reside with the airlines and I will examine all proposals on their merits. All I am seeking to do in the Bill is to ensure that once an airline has received approval for its air fares proposals it will stick to selling at those levels both directly and through intermediaries such as travel agents.

Finally, I should say that, in the light of my decision to introduce this Bill, I have decided to terminate the court proceedings to which I have made reference.

I commend the Bill to the House.

Mr. Wilson

I wish to emphasise how important the Bill is and to indicate that the Fianna Fáil Parliamentary Party considered it and came to the conclusion that it was too important to be rushed through the House. The party opposes taking anything other than Second Stage today. Have you any indication of the arrangements?

An Leas-Cheann Comhairle

Second Stage concludes at 8 p.m.

Mr. Wilson

This side of the House, as always, has particular concern for the national airline, Aer Lingus-Aer Línte and will in future, as they have in the past, support and sustain it. We gladly provided the company with equity in the past and also made provision for a cost alleviation, a substantial sum of money to aid Aer Lingus and the trans-Atlantic route. We know what happened as a result of excessive competition on the North Atlantic route to the Laker venture which was much publicised in its flight and fall and we know too what happened to Braniff which also went down on that route.

It is as well to ponder on what happened, which has been touched on in the Minister's speech, and what prompted introducing this Bill before the House. I took the trouble to read through the debate on the Second Stage of the original Bill which is being amended and strengthened by the Bill before the House. It is the 1965 Act. It is interesting to note that the late Mr. Childers was Minister at the time and that those who contributed to the debate were, Mr. James Dillon, General Seán MacEoin and Mr. Robert Briscoe. The latter Member had an interesting comment to make on the difficulty membership of IATA involved for companies such as Aer Lingus and their customers. It is revealing that he stated that when he was negotiating at some stage with Aer Lingus he found that the company could not charge beyond a certain amount — he was talking about freight rather than passengers — because the IATA agreement would not allow them to do so. He also made the point that in order to get something through IATA it was necessary to get unanimity and that this in itself was a weakening of the arrangement involved in being a member of that organisation. He advocated that a majority vote would be better for the airline.

The High Court was specific when granting the temporary injunction. Mr. Justice McMahon said it appeared clear that what had been taking place was a clear breach of the Act and conditions attaching to permission to operate. That seemed to have settled the point until the matter was taken to the Supreme Court. As the Minister stated, the Supreme Court judges, in their wisdom, stated that Trans America and Club Travel had an arguable case and that the balance of convenience lay in not allowing a continuation of the injunction. That forced the Minister to present this Bill to the House. As was noted by the Minister another way of dealing with the matter would have been to take the substantive case through the courts and get a decision on it. Apparently, it was a matter of the consideration of the time it would take to do this that caused the rush to the Dáil with the Bill. We are a little alarmed at the speed with which the Bill was brought before the House and the attempt being made to push it through the House today. I am pleased that the Leas-Cheann Comhairle has been informed that only Second Stage will be taken today. The delay will give an opportunity to the Government and the Opposition to consider the implications of the measure in full. That is the least that can be expected because there are many implications in the Bill.

This side of the House will, as in the past, do everything possible to protect the national airlines and in all prudence will aid that company when we are convinced it is necessary. However, it should not be thought that this will be done at all costs. Taxpayers are coming to the conclusion that all companies operating in their name and with their help should be subjected to the closest scrutiny. They have come to the conclusion that competition in their field should not be killed, particularly by legislation.

The Minister rightly pointed out that deregulation had taken placed in the United States. Deregulation was introduced by President Carter and, undoubtedly, the result has been to bring down internal air fares. However, as the Minister pointed out, regulation applies to international traffic but we should look at the advantages and disadvantages of deregulation in the United States. There has been a definite advantage in that customers have to pay lower fares. I made a check among people who use air travel frequently since the Bill was published and the general judgment was: "to hell with regulations, we want to get the best possible deal and fares at the lowest rate possible". That is an understandable approach. There are disadvantages involved in deregulation, even for internal flights. In the United States there have been complaints about low quality service and low quality planes being used. If red roaring competition is allowed, red roaring capitalism, red in tooth and claw, difficulties will arise.

There is a climate of opinion coming from a particular political ideology, maybe from the Right, which says that there should not be any more State or semi-State companies, a privatisation of everything with the maximum of competition from which the private citizen will benefit. Such an attitude leads to the Laker and Braniff position. The difficulty is that if a company feels it is being cosseted and can stick its hand into the public purse again the competitive edge is blunted. We should take such considerations into account. In the UK an attempt is being made to slough off most of the State companies in the transport area as much as any other area. We are aware that Sealink and British Airways are scheduled for privatisation. Going down that road all the way would not be to the advantage of Aer Lingus or the country.

People are complaining that because of the arrangements on tariffs and fares we are losing out anyway. It is true that people are using services from Northern Ireland to get to North America because, even taking the 20 per cent currency differential into account, it is cheaper to go from there. One of the dangers is that if companies are allowed to operate in the peak season and undermine the operations of a national airline, then there is no substance to support the scheduled flights throughout the year. I am thinking specifically of the North Atlantic run. As a matter of balance we must take this into account. The fares charged on European routes seem to be scandalously high and comparisons are being made with internal routes of a similar distance in the United States. We were led to believe that the European Economic Community was a single economic unit and there were all kinds of aspirations that it would become more and more united. It could be argued that by analogy flights within the EEC should at least compare in price with internal flights in the United States, taking into account fuel price differences and so on. If we say in a "barn door" way that we will protect Aer Lingus even if it means bleeding the taxpayer, then we are not doing justice either to the taxpayer or to Aer Lingus.

The Minister states that it is inaccurate to describe the Bill as an anti-consumer measure. He goes on to state:

The prerogative to submit fares proposals at whatever levels they wish will continue to reside with the airlines and I will examine all proposals on their merits.

That sentence should be studied carefully. If a proposal came from the company named in the two cases in the High Court and the Supreme Court that the Minister should sanction fares at the existing level, would he sanction those fares? That is the test of the value of that statement in his speech.

This Bill has aroused a great deal of interest. It was discussed today at the Fianna Fáil Parliamentary Party meeting and attracted so much interest that we could have spent practically the whole day debating it. I am glad the Minister has decided that only Second Stage will be taken today. This will give an opportunity to other speakers to give their views and as a result of the more widespread discussion we will have a better Bill.

Mr. Carey

In examining this Bill I was struck by the monopoly situation of the national airline. I am concerned at the restrictions being imposed in this Bill at a time when the international trend of air fares is upwards. Some airlines have gone out of business because of fare competition internationally and within the United States. Those companies which have survived have devised a new structure whereby cost savings are passed on to consumers in the form of reductions in fares. In this instance it would appear that there was competition between agents but the introduction of the regulations contained in the Bill seems to be an interference with the free market.

In my constituency we have our only international airport. Shannon is enjoying a good season so far. The number of charter seats allocated at Shannon to other airlines has been increased by the Minister and this has led to an expansion of employment there and an increase in sales in the shops. I am concerned because the Department of Transport seem to be introverted in drawing up these regulations rather than developing a planned programme for 1985. I appeal to them to liaise with other State agencies, which they have not done in the past. There were problems where either SFADCo or Aer Rianta were canvassing for business in the United States only to find out that the Department of Transport had sent a telex stating that airline companies should not apply for additional charter seats because all the available seats had been taken up.

I appeal to the Minister to see that all other competitor countries have the type of regulations we are proposing in the Bill. We would seem to be giving away an opportunity. When the airline companies operating in the UK, France and elsewhere have the same kind of protection for their national airlines as we are proposing here, then it will be time enough for this provision.

Mr. R. Burke

I warmly welcome this Bill. I am glad that in his introductory speech the Minister of State clearly gave the lie to those who have been debating this measure in public during the past few days and who say it is anti-consumer and anti-liberal. He stated:

Government control of air fares is the accepted norm and that applies even in the case of administrations who are to the fore in advocating liberalisation. I should add that the ECC Commission, which has recently put forward proposals aimed at developing a community air transport policy, also accepts the fact.

We have had over the last couple of days a repetition of a debate which took place here 20 years ago when the talk was: if only Pan-Am or TWA could get landing rights at Dublin instead of going straight into Shannon it would liberalise air transport into this country and the consumer and country would benefit from the additional tourists carried here, that Dublin and Ireland generally would be highlighted in the advertising and promotional campaigns of both airlines. We saw what happened when they did gain landing rights at Dublin. They stayed a while and then collapsed. Why did they collapse? Because at that time they wanted the cream of the business only in the summer season and were not prepared to accept what Aer Lingus had had to accept, that is, 52 weeks of travelling across the Atlantic, carrying people to this country throughout the range of their scheduled services at times when it is not an economic proposition as well as the cream, the summer season, the period around Christmas and St. Patrick's Day.

As an island nation it is vitally important that we have a stable, national carrier providing a network of scheduled year-round services. That is essential from an industrial point of view. I had the privilege of serving as a Minister of State at the Department of Industry and Commerce for three years when on a number of the IDA promotions worldwide in which I was involved the point was always emphasised, particularly in the USA, that we had a scheduled service from Dublin to America and also a network of scheduled services throughout Europe.

What will happen if this Bill is not passed? We will then have a free-for-all situation in which the Trans-Americas, the North-West Orients and others will service this country, but they will cream off for three months of the year the tourist business available without providing any additional business. They will not add one iota to the overall number of tourists coming here. If they do carry a small percentage of tourists the number will be minimal compared with the national damage that will be done if our national carrier is driven to the wall off the North Atlantic route. Let it be said quite clearly that it is the Coalition Government policy — and it was Fianna Fáil Government policy in the decision we took in July 1982 and eventually implemented by this Government in March 1983 — that Aer Lingus should continue on the North Atlantic route.

Aer Lingus themselves had severe reservations about it. They felt that because of the economic situation they would be unable to bear the burden it imposed on their organisation overall. From a national point of view the present Government and ours saw the need for Aer Lingus to continue a scheduled service across the North Atlantic 52 weeks of the year. Are we now prepared to allow that national interest to be sacrificed on the altar of consumerism? I say "no" and I would be prepared to stand over such decision in any forum. Are we prepared to see Trans-America, North-West Orient and other operators come in and cream off the best of the business for a couple of months for their profit motive alone? If the North Atlantic service of Aer Lingus were to go it would mean that up to 1,500 jobs would be lost in Aer Lingus. That is something I am not prepared to foresee — 1,500 jobs being lost in Aer Lingus alone leaving aside altogether the damage it would do us internationally in so far as our industrial and commercial development are concerned, because we would not then have scheduled services.

We have heard talk of liberalisation before. We have experienced the example of Laker when he set out initially with his package tours and was then going to provide a walk-on/walk-off service across the Atlantic. He spoke of the damage he was going to do, the lessons he was going to give to British Airways and other carriers across the North Atlantic operating out of London. What did we see? We saw Laker go to the wall, but very nearly bring the national carriers to the wall with him. We saw the same thing happen to Braniff. Are we prepared to see the same thing happen to our national airline representing a small island nation whose industrial, commercial and tourist life is dependent on them for communications with the outside world?

It has become somewhat the in-thing to attack IATA and the role Aer Lingus have played within that association. IATA was established by Governments, including ours, to ensure the orderly development of aviation, to protect consumer interests and to set fare rates at economic levels enabling international aviation to be operated commercially —"commercially" seems to be the sacred word nowadays — together with consumer interests. It is important that Aer Lingus and other national carriers be allowed develop on a commercial basis, providing scheduled services not merely in the high, peak season but also in the bad winter times. IATA was established not alone to organise air transport and order its development but also to protect consumer interests. Surely the interests of consumers are best protected when they know that they have guaranteed national carriers rather than the pirates who come in and out with the tide, the odd time they come in on a high tide but they come and go? As a nation are we to be dependent on these types of operators coming here for their short-term commercial gain and then departing from us as they did in the past? I gave the House an example of the Pan-Am/TWA situation as it affected Dublin Airport. The damage they did Aer Lingus during that period should be remembered.

This is not legislation merely to protect Aer Lingus. The suggestion is that Aer Lingus is inefficient in this, that and the other way. I reject that whole insinuation with regard to their efficiency, because they have taken great strides in the past couple of years to render themselves even more efficient. They have reduced their workforce by up to 9 per cent. They have introduced new turbo prop aircraft on feeder flights into the midlands of England, Liverpool and other areas. Aer Lingus' continuation and strength are essential, not just for their sake as an organisation, but for us as a nation overall in regard to communications with the outside world.

I make no apology for saying that this is national business in which we are engaged. It is not merely the protection of the jobs of Aer Lingus workers, the managment of Aer Lingus or anything else. This is essential national business in order to protect our interests so that our industrial and commercial development and job creation programmes can proceed. Let us never fall into the trap, as we did before, of accepting the short-term service to Dublin provided by Pan-Am and TWA. For Heaven's sake let us recognise that the overall development of airline transport around the world must take place in an organised and orderly manner without bowing to any of these foreign carriers who come here for short-term private gain rather than in the national interest.

Mr. Taylor

Like other Deputies who have spoken, I welcome this Bill. I would broadly agree with the remarks of the previous speaker. However, he appears in one sense to be rather contradicting himself by saying that he does not view this Bill as a protectionist measure but rather as our engaging in national business. I see it as a protectionist measure endeavouring to give commercial protection to Aer Lingus. I am not ashamed of saying that. On the contrary, I want such measures. It is right and proper that every possible protection should be extended to this important industry and to any other of our industries that are under pressure and attack by unfair trading practices — and there are many of them.

In some circles the concept of protectionism for our industries is regarded as a dirty word. I do not see it in that way; quite the reverse. I have said in this House in other contexts that other countries worldwide within and outside the EEC have no hesitation in protecting their own industries and dumping their products here, just as airline tickets have been dumped here in this context. We have exercised a restraint in that context well beyond the call of duty and it is time for us to look at this industry as this Bill does, and at other industries also in the same context and adopt like measures. It is essential for the protection of the national airline and the preservation of the jobs in it that the question of ticket sales to which the Bill addresses itself be controlled in an orderly and understandable manner and that a proper regulation is seen to be done in a fair and proper manner.

We live at a time of increasing complexity in all walks of life. We came to expect it in, for example, the fields of taxation, with a healthy crop of taxation experts and consultants creeping up. We have seen our social welfare code likewise increasing in complexity beyond the understanding of the man in the street. Likewise, an expert is required here to unravel the complexities of the various kinds of airline tickets. I have heard said what I know to be a fact: that an airline setting out from Dublin to London, New York or whatever, you might be hard put to find more than 10 or 20 per cent of the people paying the same fare. A variety of fares could apply and the various permutations, computations and complexities in ticket prices requires an expert consultant to unravel. That should not be so. A simplicity that the man in the street can follow should be written into this system. The Minister, under the powers he takes under existing legislation and this legislation, should ensure that prices are kept to a minimum, that they are understandable and consistent and that this enormous complexity is taken out of the system.

At the same time, there is more to it than just the pricing. When the Minister takes upon himself, rightly — and I support the concept — control of the pricing he also has to ensure and insist that the level of service that the airlines provide in exchange for those prices is maintained. I am afraid that the pattern as I have seen it in air travel over the last decade or two presents a sorry picture. We have seen airline fares on scheduled services escalating out of all recognition at an appalling rate. On the other hand, we have seen deteriorating the level of services that the airlines provide to the customers who use those services. I remember the time when you arrived at Dublin Airport and people employed there would take your case, carry it in, see you in, you would get a cup of tea on the plane to London and some assistance with your baggage and so on. All these services have dissipated over the years and the people employed to provide those services no doubt have joined many others on the dole queue. The level of services has gone down and down, but has there been a reduction in prices commensurate with that? Quite the reverse, even making allowance for the inflation which we know has been there. I am quite sure that a comparison of the index would show that these prices have escalated well beyond the rate of inflation. Therefore, I ask the Minister to look closely when the airlines put up their pricing figures to him, and not just to look at the pricing but see what level of servicing is provided and insist that they stop the existing practice of treating people like sheep, herding them around, having scant regard for their customers. I would also ask him to ensure that the uniformity we want here is not abused.

The practice of over-booking should be examined. It is standard practice in the airlines. They do not mind. They sell an extra 10 per cent or whatever above the number of tickets that will fill the plane in the hope and expectation that that number will not show up. It is true that sometimes they do not show up, but sometimes they do and unfortunate people who thought they had a guaranteed seat are left stranded. We know full well that this practice of over-booking is standard procedure with the airlines and it should not be permitted. The prices are high enough. The people are entitled to have a guarantee in this kind of situation that they will have their seat and also a reasonable level of service. There are two sides to the coin. If something is to be organised on a proper basis, if prices are to be organised properly, that is all right; but the level of service and the guarantee must also be provided for.

Mr. O'Malley

I oppose this Bill very strongly and I am surprised to find it produced here at a time like this and in these circumstances. It has all the hallmarks of emergency legislation. Apparently it became available only this morning and the original intention was that it would be rushed through this House in all Stages at 8 o'clock tonight. There have been second thoughts and now it is proposed to complete only Second Stage by 8 o'clock tonight. I do not know what date has been fixed for Committee and remaining Stages. I hope that sufficient time will be allowed to enable the fundamental errors that I think underlie this Bill to be fully realised and that the Government will think again about the steps they are taking and realise that they are flying in the face of normal economic sense and good commercial practice. They are making a laughing stock of this country through the Irish Government being the only Government that I know of in the western world at present who are bringing emergency legislation into their own Parliament to push up air fares as much as possible. This is happening a week or two after the signature of an important bi-lateral agreement between the British Government and the Dutch Government which has been widely welcomed in both countries and has had the effect of reducing the return fare between London and Amsterdam to £49. The distance between London and Amsterdam is roughly the same as the distance between London and Dublin, and what is the return fare between London and Dublin? Why should Irish passengers and British passengers who want to come to Ireland be caught at such an enormous disadvantage? The fault of the high level of fares between Britain and Ireland does not lie with the British Government or British airlines, and the sooner we realise that the better.

It is interesting to note the joint statement issued last week by the British and Dutch transport Ministers, Mr. Nicholas Ridley and Mrs Nellie Smit-Kroes and which was reported in the Financial Times of 21 June, 1984:

For too long civil aviation in the EEC has been constrained by rigid and inflexible rules which have stifled its development.

For too long cost cartels and protectionism have been the order of the day. This has been bad for airlines and bad for their customers. The agreement we have reached today enables the industry to break free.

The report continues:

The two ministers said they hoped the new agreement would spur other EEC countries to abandon airline cartels.

It is too bad if they expect that sentiment to extend west of the Irish Sea from the evidence that is before us in the form of the Bill, a Bill which runs totally counter to what the British and Dutch are doing and to what the EEC Commission as well as every other western Government are endeavouring to do.

The Minister's three-and-a-half page speech is a low-key effort which indicates nothing. There is no attempt, for example, to reply to the arguments put forward in the past few days by a number of prominent economists and in particular there is no attempt to reply to the arguments outlined in an article by Mr. Seán Barrett of TCD which appears in today's Irish Independent. But that is not surprising since it would be difficult if not impossible for the Minister to reply to most of these arguments. There is no reply to them.

It is regrettable that when this fundamental step is being taken by the Government, the Minister for Communications has not seen fit to come into the House but instead has rushed in the Minister of State in an attempt presumable to keep the whole matter in a low key.

Mr. Nealon

In order to be here the Minister would have to fly back from Japan and air fares are very costly.

Mr. O'Malley

I trust he is having a nice time in Japan and, from the point of view of the country, a profitable time, I am tempted to ask whether the Minister knows about the Bill, whether he was told about it before leaving for Japan, because there seems to have been a last-minute decision to produce the Bill at this time and to make the people aware of it. In discussing a Bill which has as its main purpose the prevention of competition between travel agents, one is entitled to ask the Minister for Communications via his Minister of State what is his attitude to the situation in the Department of Industry, Trade, Commerce and Tourism where within the past few days the Restrictive Practices Commission have presented that Minister with a report of the travel agency business in this country, a report which, it is fair to assume, contains a long series of recommendations as to how travel agents should compete more openly and more freely with one another and should be involved in less restrictive practices than is the case.

Presumably on the basis of statements the Minister for Industry, Trade, Commerce and Tourism has made about general principles of competition policy, he will accept that report and implement its recommendations but how can this be reconciled with the provision in this Bill to make punishable by way of a fine of £100,000 or of two years in jail or both a situation in which a travel agent would compete with another? In relation to trans-atlantic air fares travel agents get a commission of up to 15 per cent and it has been the practice in recent times for Irish travel agents, in the interest of competition, to share some of that commission with their customers. What is wrong with that? It happens among travel agents around the world. However, such action is to be brought within the criminal code here and is to be considered not in any way a minor offence but an offence punishable by the penalties I have outlined. How can such a proposal be reconciled with the stated principles of the Minister for Industry, Trade, Commerce and Tourism who has expounded frequently and laudably the benefits of competition in this economy? I wonder if that Minister is aware of this proposal. Is he aware that while he is fixing maximum prices, the Minister for Communications will have the task of having people prosecuted for charging too little? The Bill is ridiculous but we are expected to vote it through in the national interest. It cannot be regarded in that light.

We have had to endure what is probably the highest level of air fares in the world and which is out of all proportion to that pertaining in de-regulated countries and in other parts of Europe where the degree of de-regulation is less than is the case in the US. Mr. Barrett points out that the cost per mile of an air fare between Dublin and London is 39 cents whereas the corresponding cost for the journey between New York and Buffalo, a similar distance, is 12 cents. He did not point out, though it is equally relevant, that the cost per mile of an air fare between Los Angeles and San Francisco, a roughly comparable distance, is 8 cents per mile. Therefore, the Irish consumer or the person wishing to come here is expected to pay almost five times as much as people travelling similar distances in the US pay. A plane flying in the US does not use less fuel or otherwise incur less costs than is the case here.

Mr. Wilson

Fuel is cheaper there.

Mr. O'Malley

At a time when our tourist industry is suffering so severely and not likely to have a good year this year even if it is better than last year, one would have thought that our national interest lay in maximising the number of people who might come here. This is a time when hotels around the country are closing down or are for sale. We should remind ourselves that we are an island off an island off a continent and that we have a vested interest in ease of access and that in the eighties means cheapness of access. But instead of decreasing access to the country, making it cheaper for people to come here, we are introducing legislation which will ensure that our already extraordinarily high fares will be higher.

This legislation will seriously affect Shannon Airport because the situation at present is that Trans-America, the airline against which this legislation is primarily designed at the request of Aer Lingus via their sub-office in the Department of Communications, are offering a fare from Shannon at a saving of £90. That is being done away with. A great many people who would wish to avail of that saving will be able to avail of it by travelling via Belfast. Trans-America are providing a bus service for passengers from Dublin to Shannon at a cost of £5. Passengers can avail of that and still save £85.

Mr. Skelly

But not if they travelled by CIE.

Mr. O'Malley

That would cost a lot more. In future a passenger from Dublin will not make the long journey to Shannon. If he does he will have to pay the same fare. He will make the shorter journey to Belfast and the fare will cost him £90 less than the Aer Lingus fare. Is it in our national interest that this should be so or will we continue to make the mistake of equating Ireland's national interest with the health of Aer Lingus's balance sheet? Tragically we are continuing to make that mistake.

Any other country would see that its interests were served by maximising the number of people who visited it. They would make sure they had cheap access and they would make more and more flights available. We do the exact opposite. Aer Lingus take the view that it is better to sell 100 seats at $200 rather than 200 seats at $100. The revenue would be exactly the same and the national interest would be greatly helped by having an additional 100 people visit this country but Aer Lingus would prefer to fly the plane with 100 empty seats. Ireland has lost out by that and will continue to do so. Any hope that there might be an improvement in the situation from the point of view of tourism is dashed by this Bill if it is passed. Until such time as it is set aside by the European Court under Articles 85 and 86 of the Treaty of Rome it copperfastens the present policy which is to deplete to the greatest possible extent the number of people coming to Ireland by keeping the fares at the highest possible level.

The other airport which will be primarily hit by this proposal is Cork. I read with interest this morning the submissions made by the Aer Rianta staff at Cork to the Joint Oireachtas Committee on Commercial State-Sponsored Bodies. They said the whole policy which it was necessary to pursue in Cork was one of maximising the use of the airport. They have fixed costs there and whether 100 passengers or three million passengers went through Cork each year there costs would be the same. Their idea was to make the airport more profitable. What has happened? There is no possibility whatever of cheaper flights into Cork and no possibility of more people using the airport or of it becoming economically viable. This is happening in the first year ever that there was no ferry or passenger shipping service between Cork and Britain. It is happening at a time when a wise Government who wanted to help the economy would go to the British and tell them they had made an arrangement whereby they have £49 return fares between London and Amsterdam and ask them to make an arrangement so that there would be £49 return fares from London to Cork. Instead of that the opposite was done. Fares will only move in an upward direction.

I do not want to go on at too great a length about Aer Lingus. The tragedy is that if one criticises anyone or any organisation one is painted as, in some way, casting a personal slur on everyone involved and on every member of the organisation.

Mr. Kelly

And on all belonging to them.

Mr. O'Malley

It would be said that O'Malley is anti-Aer Lingus. The truth is that Aer Lingus — this has been my opinion for some years and I did what I could when in Government to change their attitude but without success — have followed policies which were ill-advised and damaging to our economy. If this Bill is passed it copperfastens for all time those policies. That is a tragedy and a disgrace. It should not happen. I will be voting against the Bill.

I wonder whether Ministers such as the Minister for Industry, Trade, Commerce and Tourism know what is in this Bill? It has apparently been rushed out in the last 24 hours. I know how Governments operate. Not every Minister can attend every meeting and it is conceivable that the Minister did not even see it. If he had he must have been revolted not just at the detail in the Bill but at the very principle involved. If a travel agent gives one per cent discount to a good customer from whom he makes thousands of pounds each year he is committing a crime for which he can be fined £100,000. We must be the only country in the world that puts people in jail for charging too little and for not making the maximum profit. It is a regular feature of the travel trade business that travel agents give occasional free tickets to very good customers. For example, if a man travels ten or 12 times a year to New York it might not be unknown for his travel agent to offer a free ticket for the man's wife once a year or once every two years. If he does that now it is a crime and he will be subject to a possible penalty of £100,000 or two years in prison. Everyone outside of IATA are against what is being done in the Bill. I am sure many of them do not know about it yet but they will break their sides laughing at what the Irish Parliament are doing.

I should like to refer to a report of the fifth meeting of the Ad Hoc Group on Inter European Air Transport Policy of the European Civil Aviation Conference which was held between 5 and 7 May 1981. It was attended by the air transport regulators of all the European countries and was chaired by a distinguished Irishman, Mr. G.W. Lumsden, who was then in the Department of Transport but has since been seconded temporarily to the European Civil Aviation Conference as a full-time official. Among other things they stated:

Because of the dual government involvement in airlines' international routes, it is not possible for any one state's national legislation to override the provisions of bilateral air services agreements and the requirements for inter-governmental agreements on tariffs. It is possible of course that national anti-monoply legislation could influence a government's approach to international tariff negotiations but no one government can enforce its national law on another. To attempt to do so would be to lay claim to extra-territorial jurisdiction.

That is a statement of fact. It is not a revolutionary recommendation. If this Bill is passed it will attempt to lay claim to extra-territorial jurisdiction. I draw the attention of the House to what Mr. Nicholas Bethell said in his submission to the Commission of the European Communities recently on the question of air fares within Europe. He is a Conservative member of the European Parliament for London North West. I do not know if he was re-elected recently but let us hope that he was, because he seems to be a sensible man. He says in his submission: I believe the present system by which air fares are determined for travel on the main airlines of the European Community to be contrary to Article 85 and Article 86 of the Treaty of Rome. Paragraph one of Article 85 forbids undertakings to fix selling prices or to share markets with the object of restricting competition. Article 86 forbids undertakings with a dominant position within the Common Market to impose unfair selling prices or apply dissimilar conditions to equivalent transactions.

What is being done by this Bill other than precisely that? The only difference is that it is assumed in other countries that it is airlines, big companies and so on that come together and do this surreptiously or clandestinely. It is not assumed that states would impose breaches of Articles 85 and 86 on companies trading internationally. However, that is what is happening here. Mr. Bethell goes on to say:

By agreeing to almost all the proposals for route sharing and price fixing proposed by their main publicly owned airlines, by consistently refusing proposals by privately owned airlines which would provide regular air services within Europe at sharply reduced cost, the governments of member states are clearly in violation of Articles 85 and 86 of the Treaty.

If they were, how much more so are the Irish Government in violation of those two Articles of the Treaty if they seek to pass this legislation? It is worth briefly calling the House's attention also to the Proposal for a Council Directive (EEC) on Tariffs and Scheduled Air Transport between Member States, presented by the Commission to the Council in Brussels, 26 October 1981. At page 3, paragraph (n) the Commission says:

The Commission considers that the present fare structure is too much a result of the interests of the airlines and that there are many routes where the consumer choice is too limited and where no low tariffs. e.g. based on a break-even seat factor of 85% are available;

It is perfectly clear what the attitude of the Commission is. As far back as 1981, with Commissioner Burke then and in earlier years, the Commission endeavoured to break the European cartel of which Aer Lingus, with Lufthansa and one or two other airlines are the main upholders but a much more up-to-date quotation from the Commission, from a document sponsored by a Mr. Giorgios Contogeorgis and a Mr. Frans Andriessen respectively, the Commissioners for Transport and for Competition reported in the Financial Times of 14 March 1984:

Fares would remain subject to Government approval

— and the Minister of State is, of course, right is saying that.

— but if the two sides cannot agree, then the country originating change should be allowed to go ahead.

The House should ponder for a moment on that. What that means in this context is that if the American side want a change then, under the Commission proposals laid down there, the side who want to change are entitled to make the change. The Americans want to charge less to get into Ireland. They want to bring more people in here. It is the legal duty, I suggest, of an Irish Government not to stop them, but it is certainly the political and economic duty of an Irish Government not to stop them. If the Government want to stop more people coming in here and the airlines from bringing in more people, I suggest that the Irish Parliament should exercise its powers to try to stop them from acting so foolishly.

I have by no means dealt with all the many points which arise on this, but it would be unfair to go on for too long as I know that there must be many other Members from all sides of the House who want to contribute. However, I would ask the Minister of State, as it is hoped that he will have an opportunity between now and October of thinking about Committee Stage, to have a fundamental rethink. I would invite Members of this House who are concerned with the state of our tourism industry and with the vulnerable position of airports like Cork and Shannon, in particular, to join with me when I challenge a division on Second Reading of this Bill tonight.

Mr. Coveney

First, I am glad that the Minister has agreed that this matter be confined to Second Stage debate and that this legislation would not be rushed through the House. It has opened up a debate — and, if I may say so, a can of worms which needs to be opened up.

The Minister said at the outset that the purpose of this legislation is to close off a potentially serious loophole. I think that he has a duty in that respect. Otherwise we should be talking of doing away with the 1965 Act altogether. To the extent that in its narrow sense the Bill just does that, I could support it for that purpose alone; otherwise I would be supporting chaos. Either we have a law that is capable of being enforced fully, or we do not. I have grave concerns and worries about other issues which this Bill has opened up in this debate.

Deputy Wilson very adroitly referred to page 4 of the Minister's statement in which were the words "The prerogative to submit fare proposals at whatever levels they wish will continue to reside with the airlines and I will examine all proposals on their merits". I should like to hear the Minister at some stage give his views and thinking on that statement. If it means that he will, for example, go along with a percentage of low cost carriers getting on to the Irish market, then I should be less concerned than I am. I think that the record of all Ministers in this area is that they have tended to support relatively high fares in their perhaps understandable concern about sustaining the national carrier, about which we all must have a concern.

I should like therefore to direct my comments to that sentence to which Deputy Wilson alluded. What is the Minister's attitude to the whole question of air fares? I should like to say a few things about the pros and cons, if I may. First, whether we like it or otherwise, Aer Lingus are there. We are proud of them in most respects. They have done a good job in the country. We needed them and we still need them. Therefore, no Minister can address this subject without that concern. However, at times we have faced those issues here by an overriding concern which disregards the other side of the picture. As a result of that approach, this is the most expensive island to get on or off, no matter how you travel. As a result of the same philosophy we have the highest energy costs in Europe; we have extremely high postal charges; we have a whole series of results of that concern to protect national undustry. I suggest that we must look very seriously at that. In addition to the need to protect Aer Lingus, we must have some concern, also, about the other international carriers who come in here on the basis of the same price structures as Aer Lingus. We have to protect the viability of our routes, particularly across the Atlantic and therefore cannot just cut and run for the lowest cost on the basis that that is necessarily the right thing to do.

On the one hand, I would say that we must be very concerned about Aer Lingus, about making our routes attractive to international carriers and also about the viability of travel agents. We have seen some very unfortunate crashes, with disastrous results for the consumer. If we go for an absolutely uncontrolled cut-price situation, clearly some travel agents will go out of business and the consumer will be the sufferer there. There is that side of the coin and that case is very well articulated generally in this House.

The other side of the coin, of course, is, what is in the national interest? What is the real consumer interest in all this? Deputy O'Malley has spoken about the two airports outside Dublin. Certainly I know little enough about Shannon, but can vouch for the fact that Cork Airport is, and has always been, starved of business relative to its size and the minimum infrastructure which is necessary to have an airport there at all. Even though this legislation is only closing a loophole, any legislation which creates an atmosphere of relatively high fare protectionism is certainly not a good development from the point of view of Shannon Transatlantic or of the future viability of Cork airport. I want to make that point to the Minister when he is dealing with the broad question of his approach to fares applications, which I hope he will deal with.

I also want to refer to the need of slotting into our general travel policy a place for the low cost traveller and the low cost travel agent. There are certain people who could not fly at all unless there is a fare they can afford to pay and we must have a place for them. In my opinion we cannot support Aer Lingus to the point of that company not making that provision. That is where I would draw the line, without allowing a total free-for-all.

Deputy O'Malley referred to the cost per mile of comparable distances in various parts of the world as reported in today's papers compared with the cost of getting on and off this island. It is a national scandal. There is no question about that. The cost of flying from Cork to Dublin is impossible. Only a tiny minority can afford it. Only those who are subsidised can afford to fly from Cork to Dublin or Dublin to London and back. Added to that as of now we have no ferry to the UK. That is a serious problem for the viability of the south-west of the country.

With regard to tourism, the argument has been advanced that the viability of Aer Lingus takes precedence over the liability to tourism. That balance has not been correctly struck and nothing will convince me that any policy other than an open-sided policy will bring us the maximum number of tourists. We accept the need to sustain Aer Lingus but there is another road we should travel. It is absolutely ludicrous when one talks to American travel agents and to people in the United States about the possibility of visiting Ireland and they respond by talking about the impossibility of visiting Ireland because they cannot afford it. There are millions of Irish Americans overflying this country to the United Kingdom because they cannot afford to stop here or they are not willing to stop here because of the fare structure and policy we follow. That must be bad. It is certainly not in the national interest.

If the Minister does not make a fairly dramatic break from the traditional approach to fares in and out of this country tragedy will inevitably follow in that people will find a way outside of the Republic just as they have found a way across the Border in Belfast and over in London and there will avail of cheap air fares and we will lose that traffic. I have not read the Bill line for line but my initial reaction is that it seems to me the penalty is very severe for what could not be regarded as a major crime. To summarise, I could support a very narrow view that the purpose of the Bill was nothing more than the closing of a serious loophole in order to ensure that chaos would not prevail. I have very serious reservations about the general tone of the Bill and the disregard of consumer interests. Without a very comprehensive statement from the Minister on his general attitude to the cost of air fares I could not be at all happy about this Bill being enacted in its present form.

Mr. Flynn

There is no doubt at all this Bill was speedily put together for some reason known only to the Government and to the Minister. It was admitted by the Minister on the Second Stage that the Bill is in reply to a request from and in support of the Aer Lingus situation. That demonstrates the influence Aer Lingus apparently has in these matters when dealing with the Department of Transport. I suggested not so long ago that the time had come when there was an obvious need to separate the controlling Department from the fare structure. This is a clear example of that step not having been taken. It has been clearly shown now that a particular organisation can move not alone a Department but even the Government to meet a point of view. In this instance the result is anything but satisfactory. It is not fair that the Second Stage should be taken today. Amendments will be necessary and we will certainly be obliged to oppose the Bill in its present form. Certain sections may be in the national interest but, taken as a whole, it will militate against the consumer. It is odd, to say the least of it, that a Department interested in consumer legislation should introduce a Bill against the consumer.

The existing fares are most unsatisfactory. Money which should be coming into the country is actually going out of the country. That is most unsatisfactory. It is a reflection on the Department of Transport. Tourists are flying out from outside destinations to their ultimate destination whether it be on holiday or on business. Apparently in other countries the kind of pressure brought to bear on the Department of Transport here does not exist. The whole thrust of this Bill is in support of Aer Lingus. We have all stated our position where our national airline is concerned. We are proud of the service and we are proud of their record. As an island country it is necessary for us to have a working national airline providing a service, irrespective of who might or might not withdraw their service for any reason at any time. But that is not to say that we should close our eyes entirely to the demands and the needs of the people who are using these airlines and who need the service from a consumer point of view.

This Bill does not effect passengers alone. It also affects the airlines and the travel agencies and, to a greater extent, it affects tourism. The only solution to our tourism problem is to get more people to come here. This legislation would have a detrimental effect on tourism. Sooner or later we will have to divorce the controlling Department of the national airline from the fare structuring mechanism which binds all airlines including the national airline.

This Bill was introduced in some haste. No copies were available in the Government Publications Office for the general public who might be interested in it. More than selected interests are involved. Huge numbers of people are involved and concerned about this Bill. Their livelihoods depend upon it. They feel very aggrieved to learn that the Government would move in this way without any consultation with the concerned parties except one party, the party the Minister states he is seeking to support, the national airline.

This Bill is introduced in the last dying days of this session in the hope that all Stages will be passed on the nod. To put it politely, that is sneaky legislation. It is viewed outside as such. The Minister had quite a long time since the court action he referred to, to bring in legislation and have it given a proper airing in a democratic fashion, instead of lumping it in at the end of a session in a conglomeration of measures. That is not good practice, and it has raised the hackles of many people inside and outside the House.

The suggested urgency cannot be justified. The practices which the Minister says he wants to regularise have been with us for quite some time. The Minister could have moved at his leisure at any stage and dealt with this matter in a slow, premeditated way, taking account of all the interests involved, the agents, the airline, the consumers and the operators, and particularly the tourist interests which have such a great bearing on this.

For some years travel agents found it necessary to increase their sales if they were to stay in business. For that reason they were prepared to take a lower profit on the sale of tickets by taking a lower commission. That is all that is involved. They shared that commission with the consumer. The ordinary passenger got a rebate on his fare, and he was very happy to get it. The airline received the very same net fare. There was no loss to the airline, whichever airline it was. The loss was suffered by the agent who was prepared to share part of his commission to generate extra sales and keep in business in very trying times.

The travel agents have increased their sales and the travelling passengers have got a cheaper air fare. We have the most expensive air fares in western Europe. If travel agents were prepared to take less commission from the sales of tickets, and pass the saving on to the consumer, why should the Department act like big daddy and say they could not have that little reduction in the fare because that was not playing the game according to the Department's rules. It makes no financial difference to the airline. The airline will get its stated price.

The Department should be the supporter and the safeguard of the consumer. They should welcome this as a protection and support for the consumer. It is extraordinary that that is not so. The Minister said the Department feel threatened. I do not know why the Department feel threatened. I presume it means that if they do not get their own way they will use the big stick to get their way. That is not in the interest of reform as outlined by other Ministers.

Quite a battle has been going on for some time between the various interests involved in this matter and, in particular, between the Department, certain airlines and certain travel agents. The Department want to have their way come what may. They must have taken that attitude when they commenced the High Court action last year and sought to have commission-splitting made illegal. The High Court may have accepted that the Department were entitled to a temporary injunction at that time but, according to the Supreme Court, they were not entitled to that injunction against the airlines. Since they did not get their way under the rules, the Department are now trying to change the rules so that they will be beyond the rule of law. That is not in the best interests of the Department or the consumer.

If there is such urgency, what were the Minister and the Department doing since last April? Were they waiting for the last few days of this dying session to sneak in legislation in the hope that it would be passed on the nod and they would have their way? That is not the kind of performance we would expect from a regulatory Department. There is no stated reason that can stand up as to why the Department should get involved in the ordinary price competition which exists in the market place between one travel agent and another. Why are they getting involved in this area of activity?

This has not been the practice of the Department in any other type of legislation. It is in the interests of the consumer and the general efficiency of the travel agency business that the cheapest possible fares should be available to those who want to travel. Surely everybody could subscribe to that principle. The hard-pressed consumer is entitled to get the best deal he can. The Department are trying to muck into an area of commercial business in which they were never formerly involved.

It is obvious that if they were genuine in their interest they would have been much more explicit in sections 3 and 4 of the Bill about what they would do if difficulties arose. Why was the Minister not asked to take account of the fare-paying passenger in the legislation as proposed? There is not a word about the consumer. Why does the Minister not encourage competitive pricing? Why is it that he always makes a decision as to what suits him irrespective of anyone else? In this case he is giving no say to the consumer, the unfortunate person who would like to avail of a cheaper fare that he could get in any other jurisdiction on either side of the Atlantic. Why is the Minister not obliged under the legislation to give a written reason for the decision as to whether he approved of a particular fare? In addition, why is he not obliged to justify the reason to a particular operator for not granting a particular fare structure? This is extraordinary legislation in that it is acting as a bulwark for one particular interest, namely, the interest that has been displayed by the Department in their dealings with the national airline for many years. I do not believe the national airline want that situation to continue and certainly the consumers do not want it to continue.

The unfortunate thing about this legislation is that it will tie the legislation of 1982 dealing with tour operators and travel agents into the Acts dealing with air navigation and transport. These are two completely separate codes of operation. It was never intended to regulate the commercial practices of the tour operators under the 1982 Act. That was introduced to secure the financial stability of travel agents and to require them to have a bond available for display to the Minister to guarantee that they were viable and had the necessary finances to meet their commitments under the licence granted by the Minister. That is a far cry from trying to tie them into the Acts dealing with air navigation and transport, as is being attempted in this Bill. This Bill is attempting to do something that was not intended in the other legislation in 1982.

The situation will be that if a travel agent offers better value to any person seeking his business he will be in danger of losing his licence. It is my belief that if section 10 were challenged it would be unconstitutional under Article 43 of the Constitution because it denies the right to an individual to carry on in a commercial way. The Act of 1982 was introduced to remedy a situation that had gone a little astray with regard to the viability of tour operators and it provided that they should have a bond to ensure they did not go bankrupt, thus putting a strain on the Minister's fund. I understand this represents about £4 per ticket sold. I do not understand why the Minister has got involved in tying together these two separate types of operation so far as transport is concerned. That is what this Bill is proposing, but it was never intended that the Minister should get involved in the commercial practices of the tour operators. To suggest to a tour operator who gives a cheaper rate to a group or to an individual that this will be taken into consideration when he applies for renewal of his licence and that he is in danger of losing his licence is, to my mind, grossly undemocratic and unconstitutional. It would not stand up in any court of law.

Tour operators and travel agents have endured difficulties and there have been some collapses which were the subject of much discussion in the past few years. For that reason in 1982 the Government were forced into doing something about it and, as a result, the Act of 1982 provided for bonding. Because of that and because the recession has been biting so hard, it has been necessary for travel agents to sell as much business as possible in order to remain viable. They have provided certain discounted fares at the last minute to minimise their losses. If the Minister had been allowed to complete all Stages of this legislation today he would put some of the tour operators in financial difficulties and this would rebound back on himself in the short-term because he would have to make up the losses through the compensation fund. If the legislation as proposed is implemented no longer will it be possible for a tour operator or an agent to give any concessions with regard to fares. Discounting of business goes on in every walk of life and for Members of the Dail to show the consumers outside that we are so forgetful of their needs and to say that nobody is entitled to a discounted fare borders on the ridiculous. When the Minister has time to consider the matter, I am sure he will be delighted to remove that provision.

The Bill does not take account of the fact that air services are operated under international bilateral agreements between countries. This Bill should not apply to travel between countries where the bilateral agreements do not make provision in relation to the fixing of fares. Otherwise the State will be in violation of its obligations under some of those bilateral arrangements which the Minister has trotted out in trying to support his stand on this matter.

The Minister poses as the protector of Aer Lingus. All of us accept that Aer Lingus must stay in business and provide a service. Nobody is suggesting otherwise. If we were suggesting otherwise the action of a former Fianna Fáil administration in introducing what can only be called a subsidy in respect of the North Atlantic route would not have been contemplated at the time. Then the subsidy was £5 million and it may have been reduced to £4 million since. From the point of view of tourism and industry, it is in our best interests to have a national airline but it is ludicrous to tell the consumers who are paying that subsidy to Aer Lingus that they are not entitled to benefit by way of discounted fares that are available through other airlines who, for reasons best known to themselves, can do the job cheaper. By doing that we are asking the consumer to suffer on both accounts: he pays the subsidy but he cannot have the benefit of discounted fares. Aer Lingus should not be entitled to use the Department as a battering ram to do down the consumer just to get a fare that is still out of line with competition on both sides of the Atlantic, even though the operators concerned attempt to give a little fair play to the customer.

I should have thought it would have been in the interests of all concerned to have more airlines operate in and out of Ireland, thus increasing the number of visitors. It is in our long-term best interest to get as many airlines as possible interested in flying here from destinations that may not now be catered for by the national airline. Certainly it would be in the interest of the tourism business because so far as that trade is concerned we are a second-location destination in any event. Until such time as the question of access transport has been properly thrashed out we will not maximise the potential that exists from the point of view of worldwide tourism. This legislation is militating against any development in that area and, consequently, should not be supported.

Perhaps this is an appropriate time to apply the Restrictive Trade Practices Acts to air transport. At present those Acts do not apply to air transport and there is no reason why one industry should have less stringent requirements than others. If we applied the Acts perhaps we could find out precisely who is making what and where the malfunctions are in the system. From that investigation perhaps we would get cheaper rates to which we are entitled at the same time as protecting Aer Lingus in the national interest.

It has already been stated that this legislation is more than likely in contravention of many EEC rules. With regard to competition, it is contrary to EEC law for any country to pass legislation in support of a particular industry or operation that is directly under its control. There is no question but that Aer Lingus are under the control of the Department of Transport, or perhaps it is the other way round. Whichever has the final clout, it is not permissible under EEC law for the regulating authority to pass specific and selective legislation in support of their own interests. That would be going against all kinds of fair trading and the EEC are already on record as working towards cheaper air fares. That is the trend, and why are the Department running against the tide in not giving the same advantage to the consumers that is available in other jurisdictions? It is well known in the trade that large numbers of consumers are leaving the jurisdiction and getting flights from London or Belfast. You can even get an APEX fare to London and then qualify for a discount for the rest of your journey. Think of the loss of revenue to the State; and it also puts the operators and agencies here out of business. It also makes a laugh of open fair trading between member states. It is a backward step and there is no way, as Deputy Wilson said, that we could support it.

There are many other aspects of the legislation which cause concern including some of the language in the Bill, which is somewhat unusual to say the least. For example, section 5(4) (ii) says:

that the relevant contravention was committed without his consent, connivance or default or that he took, or caused to be taken, reasonable steps to prevent or avoid the contravention.

That puts the whole question of the framing of this legislation in question in that it was done for a particular purpose. The kindest thing that one could say in that regard is that it was sneaked in here in the dying days of this session to give the Department the power to change the ground rules on which they had lost their case not long ago. I do not think that is in the best interests of the national airline, tourism, development or passengers. For that reason I support our spokesman when he rejected this legislation. I hope the Minister will accommodate us by amending some of the offensive sections, especially sections 5 and 10, which should be repungnant even to his thinking and possibly are also repungnant to the Constitution.

Mr. Skelly

I want to make a brief contribution to this Bill which will not be entirely on the lines of the first few speakers. I do not think there is anything sinister about the legislation and I do not necessarily agree that the Bill has been sneaked into the House. I can understand the need for it and the necessity for taking quick action. It provides an opportunity which we do not often get to look at this kind of legislation and the protection it gives to Aer Lingus and the artificial way it keeps air fares high. I agree that fares are a scandal here, so this Bill is an opportunity for somebody to look seriously at the whole business of air transport to and from the country.

I am not sure that I agree with Deputy Flynn in his understanding of the Bill. People in Aer Lingus might be concerned if Deputy Flynn was in charge of this legislation because if we were to apply the Restrictive Practices Acts and allow open competition, letting airliners in from any source to provide cheap fares, it would be the end of Aer Lingus, even trimmed down, as we know it because it would do them so much damage. I hope this is not Fianna Fáil policy. However, I also have constructive criticisms in regard to fares because, as Deputy Flynn said, they represent a tax on consumers. The Minister said it was not meant to be anti-consumer, but the Irish consumer has been very badly affected by this form of tax over the years. Not many people can avail of air fares. Indeed, many people never go abroad either on holidays or on business and they could not contemplate a holiday by air due to the high fares. Perhaps it is an attempt to keep people at home.

Deputy Coveney mentioned the fare from Cork to London. The fare from Dublin to London is artifically high and there are terms in the speech that worry me — for instance, "at whatever levels they wish". There is a kind of cartel operating and fares are kept too high. I was in the House when Supplementary Estimates were passed to help Aer Lingus on the North Atlantic route where they had lost heavily. I cannot remember the exact figure but I think it was around £20 million. There is an argument for asking why we should subsidise the North Atlantic route if there are plenty of other carriers willing to fly the route and can afford to run it more cheaply and better than we can. Why must we have the flag flying over the Atlantic? It seems a childish attitude to say that at all costs we must continue to have our North Atlantic route although it is losing a fortune annually but at least we can fly to America in an Aer Lingus plane. I do not think it would make any difference to fly to America with TWA or any other airline if the fare is reasonable.

People seldom contemplate leaving Ireland although there are millions of Irish people living on the different continents. Irish people often return to see their relatives but the traffic in the other direction is not great. In recent years the only time there was a lot of travellers from Ireland to places like America was when there was a cheap rate to Florida. With air fares being controlled by legislation and the price pitched as Aer Lingus apply them it will be almost prohibitive for a family to contemplate going abroad for a holiday. I checked to see what it would cost to go to the United States with my wife and four children and discovered that although one of our children is very young it would cost £1,600 just to get there and back. That would be out of the question. We must take a realistic view of this. The efficiency of the company must be looked at.

Deputy O'Malley, in the course of his contribution, gave examples of the price per mile in the United States. On the eastern side of the US a company called People's Express charge air fares that are pleasantly low for inter-state travel. Their aircrafts are used almost like taxis because people can afford the fares. We are tied to Europe, a continent with a population equivalent to the United States, and there is no reason why this corner should not offer fares on a par with those offered by airlines like People's Express. That company offer special fares for journeys to Canada and Texas. Their service is very competitive.

Our fares are well out of line and there can be no justification for that. I urge the Minister to carry out an objective examination of them or, perhaps, call in a firm of consulants to do that work. It amounts to an unfair tax on the consumers, those who use the airline. I do not know of any argument that would prove that it is not a tax. There is no doubt that the fact that the air fares are so high means that we lose out enormously on the volume of traffic. We are inclined to forget the amount of extra revenue that could be earned if people could travel with ease in and out of the country. For as long as the tariffs are high the volume will be low and that does not make economic sense. The fares between here and the UK are ridiculously high.

While I realise it is necessary for the Department to have control over the tariff rating that does not mean that prices will remain as they are. The Minister will still have the opportunity to refuse to accept the high level of fares and carry out a reappraisal in his Department. He will be in a position to examine the effect of high fares out of the country. The high subsidies the company have been getting could be used in areas that are crying out for investment. Too often we say we do not have money for projects and yet we lash out £90 million to Irish Steel and money to Aer lingus. Yesterday we heard of the pathetic story that very little money is being spent on the enormous drugs problem we have. We must look at the fares package in the context of the Irish consumers. In future I will be slow to accept this form of artificial control and the easy way that huge sums of money can be allocated to different projects while it is not possible to provide small sums for worth-while ones.

I support the Bill because I believe the Minister must have control. It is reasonable to ask him to examine the air fare structure and not accept without a close examination the fares suggested by the airlines. If he does, it is an invitation to the airline to pitch their own prices. It is unnecessary and high-handed to have a prison sentence in addition to the very high fines for breaches of this legislation. The fines are adequate. If the breach of the legislation continues the fines can be added on daily but there is no need for a prison sentence. I will deal with this matter in greater detail on Committee Stage but I should like to draw the Minister's attention to the fact that the legislation applies to all employees.

The legislation removes the possibility of low fares here because it rules out competition. I disagree with what Deputy Burke said about Freddie Laker and so on. New airline companies took the place of Freddie Laker and are operating on the North Atlantic route successfully. Freddie Laker fought a battle with the major companies who did not want low fare competition. From the point of view of the good of the country we should have a closer look at the fare structure. We are all aware of what it is costing the country to subsidise Aer Lingus and we should examine the effect of a reduction in fares which are scandalously controlled between British Airways and Aer Lingus on the routes between the UK and here. Competition has been cut out. That is an example of what happens when we become over-protective. I have no doubt that ways will be found around this and that there will be organised trips to Belfast in the same way that buses leave Dublin city for rural areas at weekends charging fares that are much lower than those charged by CIE.

In the same way there would be cheap helicopter flights to Belfast. There might even be more competition and more airlines might come in if there was a reasonably priced service. The number of people travelling could possibly double or triple. Many people travel only once in a lifetime or at most every few years. Regular travel by scheduled flights is for business people or people whose fares are subsidised, not for the average earner. I certainly could not afford to take my wife and three fare-paying children, as well as one not paying, on a trip to the United States and pay £1,600 for it. The newspapers keep saying that I am very highly paid and pointing out that part of my salary is tax-free. The average wage would be only half of the amount I receive. Most of the population would be earning amounts between £7,000 and £9,000 per year, while I am earning about £16,400. I cannot afford to go to London because it would cost about £200 for a one-day round trip. The cost is absolutely ridiculous.

I realise that the purpose of the Act is to plug a loophole. The Minister had to act and it is a bit unfair to attack the Department. If they did not act there would be a hullabaloo. If an assault is being made on the national airline they should be given an opportunity to examine realistically their whole operation so that they can adjust to meet a changing market situation. Nobody wants to damage an enterprise which has been patiently built up and has been very successful. It has been a source of pride to the population and has done an excellent job. At the same time we should not give a licence to any institution to charge what they like or to be inefficient. I am not suggesting that they are trying to do these things but it is incontrovertible that the fares Irish consumers are asked to pay are grossly out of proportion and that this is another tax on the consumer. The poor old taxpayer is burdened so much that he ought to be able to save for a holiday.

I would ask the Minister to re-examine the question of air fares with a view to making travel cheap. We should not always kick the private enterprise person or those who try to introduce competition and give a better service. One small airline last year nearly succeeded in giving a service all over the country. There is no reason why we should not have such a service provided by Aer Lingus at reasonable prices. It would make the whole country accessible and would take a lot of pressure off cities like Dublin which have become grossly overcrowded. It might even bring about some decentralisation. I do not know when the Minister proposes to take Committee Stage but I will reserve further comment until then.

Mrs. Barnes

I shall be very brief because I am aware that previous speakers have probably made all the obvious points. What we are confronted with is the tension caused by an airline or any other semi-State body feeling that they are the answer to Irish needs and should be supported at all costs. We are conscious that we are venturing towards new horizons — perhaps that is an appropriate term to use in regard to air travel. We are constantly being challenged by a world which is shrinking into a global village. No longer can we see ourselves as an isolated country where our perfect Irish airline can be preserved in aspic. I take the thrust of Deputy Skelly's remarks. In no way can this be seen as an attack on Aer Lingus and their proud record built up over the years. We as legislators and distributors of taxpayer's money, as well as Aer Lingus, have to take into account that there is competition.

While the world is becoming a global village we are still a small spot on the outskirts and our physical isolation demands that we employ air travel. We do not have the advantage of rail travel such as enjoyed on the Continent and in the United States. Because of our geographical situation we must look practically at the demands made by the people who wish to travel abroad for work or long-sought holidays. This is becoming more and more relevant as our young people look outwards. They save all year to go on holidays. They have a greater sense of adventure than I and my generation.

The only type of travel our age group contemplated was that of the emigrant ship. Most of us did not have enough money until we had gone abroad and saved it to fly back. Hopefully today our young people will have jobs that will enable them to save toward an objective like that, which should be encouraged. This is part of the anxiety of members of this House, that young people having saved hard wishing to go abroad, see absolutely nothing but added adventure in travelling to Northern Ireland or to Great Britain and availing of a much reduced fare in getting to their destinations. This must be of grave concern to Members of this House who have seen that kind of drain already in regard to cross-Border activity. There is no doubt that discussion of this Bill will heighten awareness amongst our people wishing to travel to avail of such opportunities. We have seen the cost already to our Exchequer. None of us should encourage any further process in that direction.

As some other speakers have said, there appears to be a perception of this Bill as being anti-consumer. Bearing in mind the tremendous tax burdens imposed on people already perhaps this will be seen as an insensitive method of covering a loophole, the last people to be considered, in the public perception, the poor consumer. In saying "poor" I use the word in the context of high air travel costs at present prevailing to and from Ireland.

I know that Aer Lingus, the national airline, would be concerned with the protection of employment within the company. I would call for some kind of consultation, as has been called for by other Deputies, with regard to cost effectiveness vis-à-vis our national airline. We must remember the skills of people, such as travel agents in not only running their agencies and maintaining the numbers employed by them but actually increasing them. We must not sacrifice the protection of employment in one area to the detriment of another.

We have been told consistently of the problems that agriculture, our greatest resource, has run into and the the tremendous pressures to which it has been subjected in these recessionary times, that there is need for tremendously increased productivity so that that industry may achieve its potential. We are reminded constantly that running edge to edge with that is our tourist industry which, with proper supports and incentives, could be our next greatest resource.

Neither the Bill nor this debate does anything to increase perception abroad that we are serious about reducing air travel costs to this country, about which we must think seriously. I am glad that we are taking Second Stage only today because much thought, discussion and consultation must take place with various interest groups before we come to Committee Stage. Let us concentrate the minds of Members of the House on the fundamental issues raised in this Bill. By the time we reach Committee Stage, hopefully the consultations sought with Aer Lingus and all the other people working in the travel business will have taken place so that we may be able to bring home the harsh reality that there is no way in which a competitive tourist industry, or even the protection of consumer rights or best deal for the consumer can be achieved unless we all recognise that what is needed is cost effectiveness, the elimination of wastage, with competitive air fares obtaining, enabling us to compete with the rest of Europe and the world.

I hope this debate will continue outside the House where we must be aware of and sensitive to the advice and indeed solutions offered by other interest groups. We gave a commitment, on entering Government, that all our semi-State companies would be examined closely with regard to their giving the best value for money and eliminating every possible wastage. Certainly we shall be asking Aer Lingus to do so because that is what this discussion has raised.

Minister of State at the Department of Communications (Mr. Nealon)

Deputy Wilson and several other Deputies have raised the question of the time table involved in the introduction of this Bill. Deputy Flynn, colourful to the last, spoke of sneaking it in in the run-up to the recess. I want to make it very clear that the Supreme Court delivered their judgment on 2 May last, not in April as indicated by some speakers. Anybody familiar with the introduction of legislation will realise the various consultations the Minister had to have with the Attorney General, with his legal advisers, with the draftsmen, so that getting the Bill on to the floor of the House even at this late stage is quite an achievement. It was felt prudent that it be introduced at this stage.

A number of Deputies commented that the Department were using what was described as the big stick or excessive measures against airlines or agents. This was the point made by Deputy O'Malley and I think also by Deputy Flynn. As far as we are concerned there is absolutely no wish to engage in confrontation of any kind with individuals involved in these enterprises over this issue. I should say that it was only after very extensive consultation had failed to resolve the matter that the Minister found it necessary to have recourse to the courts in order to uphold the generally accepted interpretation of the 1965 Act which has worn for a long time and been generally accepted. Airlines for the past 20 years have accepted that their duty was to ensure that those fares approved by Ministers prevailed in the market place. That has been the situation which has failed now in one specific case. The provisions of the Bill seek only to confirm the position by placing a specific legal onus on airlines and agents to sell approved fares. Ireland, in common with other States, must retain the right to act in the national interest; that will be the main effect of the provisions of this Bill. Deputy R. Burke said that where necessary the national airline should act in the national interest and they must be able to do so effectively. Those are the implications of the provisions of this Bill.

The observations of all Deputies followed a number of main streams, one of which being the perception that this Bill was anti-competitive or, if you like, anti-consumer. There has been a degree of misrepresentation, or perhaps representation of one side of the case only, over the past couple of days. Deputy Burke referred to this also. The Bill is no more restrictive in its provisions than the corresponding control available to other aviation administrations.

As I said in my opening speech, Government control of air fares is the accepted norm that applies even in the case of administrations which are to the fore in advocating liberalisation. That goes as far as the fares are concerned from the carrier and as applied by the agents, or intermediaries as they are called, in certain states. It applies in states like the UK and the Netherlands which were refered to as introducing very low fares in recent times. The control still exists with the Governments of those countries.

Secondly, the Bill grants the Minister for Communications discretionery powers to require airlines to submit tariff proposals and to exercise control over air fares. As a general rule the focus of all these regulatory actions by successive Ministers for Communications — Deputy Wilson has been in that position — has been limited to scheduled services. In other words, the Air Navigation and Transport Act, 1965, has not been used to determine charter fare levels in the marketplace and no change in this position is foreseen at present. The House will appreciate that charter services play a significant role in providing low-priced holiday packages for the public. In respect of the scheduled air services it would not be the Minister's intention to use the Bill to prop up inefficient airline operation or to sustain unnecessarily high air fares. Similarly, he does not envisage using the Bill unduly to prevent airlines and travel agents from competing for business.

As I indicated in my opening speech, all the Bill seeks to ensure is that once an airline has received approval for its air fare proposals then it will stick to selling at that approved level both directly and through the intermediaries such as the travel agents. The primary objective in exercising powers in respect of scheduled air services under the Bill will be to ensure that the public have available the lowest possible economic fares consistent with market stability and the maintenance of a wide range of direct scheduled services to and from Ireland. Any instability in the market or excessive competition, where some of the major airlines now serving here might find themselves in a non-profit situation, could be very counterproductive as far as the availability of services to this country is concerned.

Deputy Wilson asked, very fairly and pertinently, if the Minister would approve of the fares under dispute if they were now submitted to him for approval. The Minister did approve fares with the airline involved and it is the breakdown of this approval that has led to the present unsatisfactory situation. Deputy Coveney asked the same question in another way. The answer is that all fares submitted by any airlines will have to be examined on their merits. They will have to take into account the implications for all sorts of travellers, discretionery travellers, the tourist, the business traveller and the whole area, and also the interest of the national carrier and other carriers serving the market. All of these would have to be considered. Indeed, consultations would have to take place. Therefore, I cannot give an answer to the Deputies on that and I do not think that anyone could. The breakdown of agreed fares has led to the difficulty that now exists. Remember that the system operating has operated satisfactorily for over 20 years but consultation in this case has failed to get a proper answer and that is why court action ensued and why the Bill is now ensuing.

I must reiterate the points I made in my opening remarks, namely, that the Bill is not biased in favour of either high or low prices. All states, I repeat, including Britain and the Netherlands, retain the power of regulation over their air fares. It is not the intention of the Minister to use the Bill to maintain artificially high air fares or inefficient airline operations. This has never been the case. On a positive note, I would point out that in these negotiations, as Deputy Wilson knows, the Bill does not restrict or confine to any one fare level the tariff that may be approved by the Minister. Also, as I have indicated, I am prepared to examine on their merits whatever tariff proposals will be submitted by the airline. Therefore, there is the extra implication that the Bill can be exercised in a very liberal manner to modify proposals brought forward, including bringing about fare reductions in particular circumstances. The Minister may choose as he sees fit in particular circumstances to take either approach — in other words, examine on its merits.

There has been considerable discussion by Deputies about the fact that air fares are too high. I think Deputy Wilson said that the natural inclination of all of us is to say "To hell with the regulations as long as we get the cheapest possible fare". That is a very natural reaction especially in modern times and times of economic stringency for us personally as well as for the country as a whole. Concern was expressed at the prevailing level of air fares from Ireland. In answer to these criticisms I will take some concrete examples. While fares are or appear to be high we should have concrete examples of comparison before us, taking first of all the trans-Atlantic market. One of the major objectives of the Minister for Communications is to ensure maximum growth of the tourist traffic from North America. This requires regular and reliable services at fares which are competitive with our main rival market. Of course, London is the major gateway as far as travelling to North America is concerned and it is highly desirable therefore that the price differential in favour of travel to Ireland should exist in the interest of the Irish tourist industry vis-à-vis London. For this summer the generally prevailing promotional return fares from New York to London on the main trunk airlines — British Airways, Pan-Am and TWA — are in the region of $614 to $669. Corresponding fares for the New York-Shannon route are in the region of $499 to $549 with charter levels as low as $399 eastbound. It will be seen, therefore, that the fares to Ireland on scheduled services are more than $100 below the New York-London rates with charter fares available at rates of a further $100 below these levels. A similar differential is enjoyed by travellers from Ireland to the US. Services such as those provided by the People Express, which gets all of the publicity, on the Newark-London route attract a great deal of publicity because of the low return fare, $318 eastbound and £Stg.283 westbound. However, it must be borne in mind that these services account for just a tiny fraction of the US-UK traffic and the scale of the People Express operation is very limited on the insistence of the UK Government. In other words, it cannot have total expansion. It is very limited and confined.

Within Europe itself we have much criticism. Indeed, I have voiced it myself very often in the past and I recall doing a television programme some years ago about the cost of the Dublin-London flights, and I must be honest about that. On a rate per mile basis London-Düsseldorf, London-Paris and Paris-Geneva, to mention three, are dearer than is the Dublin-London flight.

Mr. Wilson

What about Amsterdam?

Mr. Nealon

I agree. Obviously it does not compare at all with the Amsterdam example given by Deputy O'Malley, but the fact remains that some routes are dearer. Obviously others are very cheap. Given the multiplicity of European routes that exist, generally fares to and from Ireland are not out of line with those prevailing elsewhere in Europe.

Comparisons have also been drawn at the level of intra-European fares vis-à-vis the levels prevailing domestically within the US. The EEC has been quoted here. The recent memorandum on EEC aviation policy by the Commission, which has been quoted on the other side in the course of this debate, acknowledges that the level of air fares in Europe is frequently criticised and compared unfavourably with those in the US and the North Atlantic. Having studied the matter, the Commission concludes that in most cases fare levels within Europe are not unreasonably related to costs. This is a significant finding from an independent and objective body like the EEC Commission which has been concerned to promote lower fares, as we all know. They have acknowledged that costs bearing on the airlines in Europe are higher than those obtaining in the US and that many of those costs, such as fuel, are beyond airline control.

In order to increase competition among airlines with a view to reducing costs the Commission suggests in its memorandum some liberalisation of the European air transport arrangements as a means of securing lower air fares in the future. Ireland will be actively participating in discussions on the Commission memorandum in the coming months when during our Presidency of the EEC we will chair Community examination of this memorandum.

It is only fair in the general context to read a brief extract from the May issue of In-Flight magazine. This refers to competition and the fact that there are so many states operating their airlines in Europe. It is stated that each of these nations will fight to the death for its right to maintain a healthy national airline or even several healthy home-based airlines. It poses the question that if completely unrestricted competition were allowed in the EEC, how long could Aer Lingus, for example, survive against Lufthansa and makes the point that Aer Lingus has a doorstep population of fewer than 4 million against 60 million in West Germany while Dublin is not exactly the industrial centre or the travel crossroads that Frankfurt is. That is a fair statement that puts into perspective the very serious task so far as our national airline is concerned.

A number of statements made appear to suggest less than a full knowledge of the competitive situation in Ireland both in respect of the trans-Atlantic and European routes. There is a suggestion that we are involved in monopolistic tendencies or in protectionist principles and that there is no competition in operation. That is a serious misunderstanding of the position. On the North Atlantic routes to Ireland there is no formal limitation on the number of American carriers who may be designated to serve the market, though the economics of trans-Atlantic operations impose their own constraints. At present there are two US airlines operating scheduled services to Ireland — Northwest Orient and Transamerica — in addition to the services provided by Aer Lingus. During the summer period the services of these airlines are supplemented by a large number of charter services provided by three non-scheduled operators. Far from being restricted, the North American market is probably the most competitive in the world. This has been illustrated by the fact that a number of US carriers who previously served Ireland withdrew services entirely a few years ago and I need hardly remind the House of recent failures by large carriers on both sides of the Atlantic. Deputy Wilson has referred to the collapse of many airlines on both sides of the Atlantic.

The cross-channel and European markets also have a degree of competition greater than is represented by many observers of the scene. It may not be realised generally that the provision of services between Ireland and the UK is not confined to the well-known operators like Aer Lingus, British Airways and Danair. There are a total of eight airlines serving cross-channel routes. In the course of recent years as many as 12 carriers have been involved in Ireland-UK operations. Unfortunately, many of these were unable to survive on the routes and eventually withdrew services.

It should be remembered also that the cross channel airlines are subject to very severe competition from surface transport. The network of ferry services operating at very attractive rates are taking an increasing share of cross-channel traffic and represent a counterbalance against excessive fares. We have, I am glad to say, a very healthy degree of competition.

While experience has shown that excessive competition involving the dumping of spare capacity at uneconomic rates can destabilise the industry and acts in the long run against the consumer interest, it is clear that a judicious degree of competition can have a salutary effect in promoting efficiency and cost reduction as well as stimulating the market. Deputy Wilson said he welcomed very much the level of competition and did not favour any airline being cossetted to such an extent that it became flabby. In the context of this Bill it is only right to point out that the Minister for Communications has demonstrated his commitment to stimulating competition on the market by breaking new ground in the allocation of routes to independent airlines both on internal and cross-channel routes. The collapse of one independent Irish carrier and the significant curtailment of services by another represented an unfortunate setback to that policy and a loss or reduction of service to certain communities. At the Minister's request Aer Lingus have partially filled the gap at least for the current season but the Minister remains receptive to applications for the provision of internal and commuter type operations from Irish aviation interests.

I think I have demonstrated that the policy of the Minister and of the Department has not been anti-competitive. The problems in the air transport sphere arise from a variety of economic reasons and it is facile to suggest that they can be magically resolved by a laissez faire policy. A degree of regulatory action combined with an efficient and commercial approach represents the best balance. That is the approach on which the Bill is based totally.

Deputy O'Malley referred to a certain ECAC document. I do not have the document but I listened carefully to what he said and I think he may be under some misapprehension on this point.

Existing bilateral agreements and arrangements provide normally for the approval by both states of fare proposals on scheduled services. Therefore, each state exercises a veto over the level of fares that may be applied to or from its territory. Consequently the question of extra-territorial jurisdiction does not arise.

Deputy Wilson, and many other Deputies too, referred to the US policy on deregulation within the US domestic market. But they retain control as far as international travel is concerned, precisely as we maintain such control, that is, control so far as the carrier are concerned and also the possible intermediary sellers of their tickets.

A study just published by the Civil Aviation Authority in the UK, who have been examining the effect of deregulation in the US, is of interest. Their first conclusion indicated a wide divergence in the effects of deregulation in the US. The UK study acknowledges that deregulation has increased both the scope and the intensity of competition. However, within the overall conditions the effect on users, both in terms of price and of service quality, has varied enormously from city to city and from route to route. As one would expect, the trunk routes have experienced some reduction in fares, substantial reductions in some cases, while on the less competitive routes normal fares have increased sharply.

The range of promotional fares has become much more restrained and some services have been discontinued, but there has been a considerable internal reorganisation of activity. Many of the airlines have now moved into a different type of operation which is known as the hub and wheel operation and which is better known in this part of the world in the context of packages or goods carried, where one of the operators would establish a central hub that all would fly into and operate out of. I do not think that could be of benefit to many areas although I have no doubt that it would be greatly of benefit to the air companies. Deregulation cannot be a panacea for everything. The UK experience has shown this.

Taking a broader view, we must realise that there are 20 major airlines operating in the US with 50 smaller airlines and up to 100 other carriers. The collapse of one or two such airlines would not adversely affect the scale of internal activities in the US. The situation here is vastly different. Each European state normally has only one or two airlines and would be anxious to safeguard them in the national interest. They would set their face firmly against the collapse of a national carrier.

Deputy Carey referred to the volume of US charter traffic into Ireland. The volume of traffic approved by the Minister from the US to Ireland is 50 per cent up on 1983vis-à-vis traffic from New York and Boston in the peak June to September period. I am satisfied there will be adequate capacity to cater for the volume of traffic.

Deputy O'Malley made comparisons with certain low fares available on domestic routes. I dealt with those earlier in reply to a point raised by Deputy Wilson. We can never aspire to organise our affairs as they have in America. In Europe, there are over 20 sovereign states each with its own national carrier and with a specific interest in protecting its carrier. Comparisons with the United States are not valid. Carriers coming into Ireland whether through Shannon, Cork or Dublin are only interested in making profit. We must ask whether we could rely on foreign carriers to provide year round service into Ireland. Would areas like Cork and Shannon be abandoned by foreign carriers if we had a free for all? These are the points which must be taken into consideration. They are often overlooked in the national concern to have the lowest possible air fare.

It is too simplistic to argue that the measure we are introducing is anti-consumer or anti-social. Ireland and our national carrier are only one element in the European and global air transport network. Neither Ireland nor Aer Lingus acting alone are in a position to bring about benefits for the consumer of the kind mentioned by various speakers. We can only move in concert with other states with whom we have bilateral arrangements. To do so would be to abandon the national carrier and the Irish consumer to the whims of an unpredictable foreign service.

A number of Deputies, including Deputy Skelly, commented on the penalty provisions in the Bill. These were worked out in consultation with our legal advisers but I am prepared to consider the comments made and will look again at these provisions. Deputy Flynn referred to the possibility that certain aspects of the Bill could be regarded as unconstitutional, and he specified some of them. The Bill has been looked at by the office of the Attorney General and they are satisfied that the provisions are constitutional. If I were asked for a choice I would come down in favour of the Attorney General's opinion as distinct from Deputy Flynn's although he might deliver his opinion in more colourful language than the Attorney General as a legal expert would choose to do.

Deputy Skelly raised the need for the Irish flag carrier on the North Atlantic service. There is no question about that. Deputy Burke raised it earlier in a trenchant fashion and described clearly how the national interest was involved.

Deputy O'Malley compared the low fare on the London-Amsterdam route at £49 with the Dublin-London fare. I do not know if that is £ sterling or IR£. It must be pointed out that the £49 fare is a one way fare.

Mr. O'Malley

It is not.

Mr. Nealon

As I understand it, it is not a return fare. On a round trip basis the fare is £98 sterling which is equivalent to about IR£125. The equivalent Dublin-London fare is IR£157 with lower Apex fares of £105. I am glad to be able to put that into perspective. The public interest requires protection against excessively high fares involving the exploitation of a dominant position. That is accepted. They also require protection against increasingly low fares which could constitute dumping. That would create difficulty for the regular services.

All governments recognise the importance of air service as a tool of economic and social development. Many states own and operate a national carrier because of the widespread belief that they should not depend on foreign airlines to provide the necessary access to and from their neighbours.

Ireland, too, has a national airline which has served us well in the past and which currently provides us with a good range of air services to the US, Europe and the UK. Indeed, Aer Lingus has a significant market share which it has earned because of its sustained and comprehensive commitment to that market. In order to maintain economic operation of existing services, airlines must be able to obtain a reasonable return. While this has not always been possible in recent years, most airlines are making considerable efforts to cut costs and improve productivity. As a result many airlines, including Aer Lingus, are now showing improved performance after years of heavy losses.

Many carriers, however, still reflect the serious losses already incurred. The problem of fleet renewal or replacement which will face the airline industry during the coming decade represents a serious challenge for the future. The industry will need a period of sustained profitable performance if it is to retain its capacity to serve the travelling public and the needs of business and tourism.

In Ireland, the Government's ability to exercise control over air fares was curtailed in the recent court decision referred to earlier. While a definitive judgment in the matter would not have been available for possibly another year, the effect of the decision was that while the 1965 Act continued to apply to airlines sales to the public, no similar controls applied in respect of sales by travel agents. Apart from the anomaly which this created, a considerable potential existed that excessive competition, leading to market instability, would arise as a result of airlines being prepared to condone, if not actively encourage, their agents to exploit this legal loophole.

Notwithstanding any short-term benefit that could ensue for the consumer from the sale of air fares at levels below those approved, the Government considered for sound reasons that it was highly desirable to confirm the right of the Minister for Communications to control air fares. In the first instance, airlines with worldwide networks and enjoying economies of a scale not available to small and basically short-haul operators like Aer Lingus could exploit the loophole through cut-price and cross-subsidised fares in order to improve their market share or cream off peak period traffic.

That is something which was referred to by both Deputy Wilson and Deputy Burke in their contributions. The services provided by foreign carriers are welcome and, indeed, are an essential part of our access transport and our tourism system, but experience has shown that undue dependence on external airlines for regular services, particularly outside those peak periods referred to, would be very imprudent.

Secondly, as a relatively small world carrier Aer Lingus, in meeting this competition head on could also suffer proportionately more than its bigger competitors on its main trunk routes. Regard must also be had by the Government to the fact that Aer Lingus have reported significant financial losses in recent years. The Exchequer is not in a position to meet demands for further equity beyond the financial package already agreed by Government. As I have already mentioned, significant profits must be earned by the company in future years to finance the high cost of fleet replacement towards the end of this decade.

Finally, any excessive competition over prolonged periods would reduce airline leads and endanger the maintenance by all airlines of the existing scheduled route networks serving Ireland. This situation could be particularly serious for a year-round North Atlantic service. May I say, and I did not mention it during the course of my remarks, excessive competition and price cutting could also create major difficulties for travel agents and lead to some further difficulties, as we had in other years.

Mr. R. Burke

We have seen a lot of that.

Mr. Nealon

The operation for some of the companies in economic terms is marginal, given the low proportion of high yield business traffic on the route and the large volume of traffic in the peak summer, relative to the winter period.

In summary, this measure was seen as essential in the national interest as a means of maintaining access for the needs of business and tourism to our main markets in the US and Europe. I think that the debate has been very constructive and very important points have been raised. It shows the deep interest aroused, and I am glad of that and I shall have benefited enormously from the points made, and make use of them.

Mr. Wilson

I quoted a sentence from the Minister's speech and said that I thought that was the nub of the whole matter. Deputy Coveney agreed with me. The Minister answered this question, but in a certain way. I am not saying that he was avoiding the issue, but would the Minister approve the fare in dispute, net or discount, if it came up to him?

Mr. Nealon

In reply to Deputy Wilson's supplementary question, if you like to put it that way——

Mr. Wilson

That is the question.

Mr. Nealon

——or the original question, I said that as far as the situation was concerned this difficulty arose because a particular fare had been negotiated and a loophole was found around it, operating through a travel agent. If it were submitted now to the Minister, as regards what his reply would be, I cannot answer that in all honesty. I said that a whole variety of things would have to be taken into consideration, including consultation with a number of people, as far as passengers are concerned, both business and discretionary travel, the tourism interest, all of these. I cannot honestly say, Deputy. I should like to be able to answer, but cannot say what the Minister's answer would be.

Mr. O'Malley

The answer is no.

Question put.

An Ceann Comhairle

Will those who are demanding a Division please rise in their places.

Deputy O'Malley rose.

An Ceann Comhairle

In accordance with Standing Order 59 I declare the question now carried and the name of the Deputy dissenting will be recorded in the Journal of the Proceedings of the Dáil. By agreement between the Whips it is proposed to take the Committee Stage of the Bill tomorrow.

Mr. B. Ahern

I know the terminology here is governed by technical reasons but the answer is "no" for the record. However, to overcome the regulations with which we have to comply, the answer is "yes".

Dáil Éireann díospóireacht - Wednesday, 27 Jun 1984

Air Transport Bill, 1984: Second Stage.

Dáil Éireann díospóireacht -
Wednesday, 27 Jun 1984